Ukraine, Moldova and Georgia sign trade agreement with EU

Today Ukraine signed an association agreement that contains free-trade deal and political cooperation with the European Union. Georgia and Moldova signed similar deals, holding out the prospect of deep economic integration and EU membership.

"Over the last months, Ukraine paid the highest possible price to make her European dreams come true," Ukrainian President Petro Poroshenko told EU leaders a t a signing ceremony in Brussels.

The former pro-Moscow Ukrainian President Viktor Yanukovich turned his back on signing the EU association agreement last year in favor of closer ties with Russia, prompting months of protests and demonstrations that forced him to his fleeing the country, Russia’s annexation of Ukraine’s Crimea region and the current tensions with pro-Russian separatists in parts of Eastern Ukraine.

The assignment with the EU immediate drew threats that “grave consequences would follow” from Russia.

Now there is the question: How might Russia react?

Ukraine - Moscow has signaled it will impose trade barriers on Kyiv over its free trade pact with the EU. Ukraine sends 20 percent of its exports to Russia (worth $15 billion per year) so this might harm Ukraine’s economy, but just until it switches to further trade integration with the EU. In fact it all depends on the current political tensions over Eastern Ukraine. The solution of the crisis could be decisive.

Moldova - Russia hasn’t mentioned any specific retaliatory measures against Moldova, but there had been threats, too. Around 12 percent of Moldova’s exports go to Russia (mostly Moldovan wine, a part of the exports are banned already). Another pressure point is Moldova’s dependence on Russian gas supplies and fears that Moscow could move to annex Transdniester region or make trouble in the autonomous Moldovan region of Gagauzia.

Georgia – Currently Tbilisi is less economically vulnerable to Moscow, because it receives gas supplies from Azerbaijan (Baku-Ceyhan pipeline, which passes through Georgia). The country also turned its trade away from Russia after the 2008 Russian-Georgian war, that caused a turn away from Moscow. But Russia could use the breakaway regions of Abkhazia and South Ossetia, which Tbilisi wants back and does not want to see annexed by Moscow, as a pressure point or even a retaliation measure.

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